Join Australia's most dynamic and respected property investment community

what price designated for cgt

Discussion in 'Accounting & Tax' started by Fernfurn, 8th Jul, 2015.

  1. Fernfurn

    Fernfurn Active Member

    Joined:
    24th Jun, 2015
    Posts:
    36
    Location:
    by a Bellarine beach
    I have bought a house and land and the block next door, all in one transaction. Stamp duty paid on the lot. If I sold the house again, what price would be designated for it? Would medium price for blocks in the area be taken away from the whole price by the tax dept. I would then have a loss on the house, not a gain and wouldn't have to pay cgt
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,989
    Location:
    Sydney
    You need a valuer to work out what portion of the original price related to the house. Then you can take into account a relevant portion of the costs such as stamp duty etc.
     
  3. Pistonbroke

    Pistonbroke Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    395
    Location:
    Guangzhou
    Is it a poor and therefore cgt exempt?
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,989
    Location:
    Sydney
    I don't think the PPOR exemption would apply to vacant land next door or to land chopped off and sold as there is no residence on it.
     
  5. Pistonbroke

    Pistonbroke Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    395
    Location:
    Guangzhou
    It would depend upon the situation - if it could be demonstrated that the two blocks of land were utilised for the ppor and curtilige then it may be exempt.

    Freefurn, why would you be selling at a loss in this market? (Or is it only a paper loss?)

    How did you come to purchase h&l and land without separate prices (ie single contract of sale and no previously advertised pricing for either property?).
     
  6. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,384
    Location:
    Sydney
    Land adjoining exempt main residence + land is also part of the exempt land provided it is actually USED as part of that residence and the total area falls under 2Ha. ie tennis court, pool or expansive gardens...even car parking.

    https://www.ato.gov.au/General/Capi...ngs,-adjacent-land-and-associated-structures/

    In the OP example I would have concern that such a venture so soon after acquisition may well be indicative of a profit making intention (whether or not a profit arises) and not be treated under the CGT provisions.
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,989
    Location:
    Sydney
    And provided it is sold at the same time as the home. If sold separately then I don't think the main residence exemption could apply.
     
  8. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,384
    Location:
    Sydney
    I don't agree if the sale is the house and land.

    ie : House + land = Lot 1. Vacant adjoining land is Lot 2. Lot 1 acquired April 2010 and Lot 2 acquired June 2010. Lot 1 owner occupied. July 2015 owner considers sale of Lot 1 (house and land) so that Lot 2 can have a new house built on it from growth in value. Owners sells and moves to rented apartment.

    A few issues :
    1. If Lot 2 acquired before Lot 1 then for a period of time lot 1 remains liable to CGT as it cant be a MR when its not adjoining a MR. (ie until Lot 1 is adjoining Lot 2 cannot be a main residence)
    2. If its Lot 2 that is sold rather than Lot 1 then yes I agree (this is the subdiv of backyard issue that many people think is tax free)
    3. If Lot1 is sold then Lot 2 would cease the MRE. The absence rules would not apply. The main residence exemption cannot apply to vacant land unless it is adjoining an actual occupied residence and used as part of that residence.

    I still have a concern as to why someone would buy an adjoining lot of vacant land. They may well just want a bigger house lot etc but its a high risk indicator for a dev intent
     
  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,989
    Location:
    Sydney
    If sold together the vacant land could be exempt.

    But in this situation there appears to be
    Lot A land and house
    Lot B vacant land

    Lot B is being sold. So even if Lot A was the main residence I believe that the main residence could not apply to lot B if it is sold separately.
     
  10. Fernfurn

    Fernfurn Active Member

    Joined:
    24th Jun, 2015
    Posts:
    36
    Location:
    by a Bellarine beach
     
  11. Fernfurn

    Fernfurn Active Member

    Joined:
    24th Jun, 2015
    Posts:
    36
    Location:
    by a Bellarine beach
    I bought this property as a rental so no ppr exemption. So if I sold the house as a loss on the original price, I could make money and not have to pay cgt
     
  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,989
    Location:
    Sydney
    Wouldn't you be losing money if you did this?
     
  13. Pistonbroke

    Pistonbroke Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    395
    Location:
    Guangzhou
    Stop over simplifying things Terry. ;)

    Sell at a loss, do not pass maths, do not collect $200. Beats me why you'd sell at a loss just to lose money and avoid paying tax. I would prefer to make a profit and pay tax than to carry forward a loss that I may never utilise.
     
    Terry_w likes this.
  14. Fernfurn

    Fernfurn Active Member

    Joined:
    24th Jun, 2015
    Posts:
    36
    Location:
    by a Bellarine beach
    If I got the house valued at its real price for the area, this would be a much higher proportion of the purchase price. If I then resold the house for approx. this price, I would not have to pay cgt, plus I would have the block really cheap which I am building on
     
  15. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,989
    Location:
    Sydney
    Don't think you are working it out correctly. Give us some numbers to check.

    You need to work out the proportion of the purchase price relating to the house, not its value.